Firan Technology Group Corporation
TSX : FTG

Firan Technology Group Corporation

October 08, 2013 17:05 ET

Firan Technology Group ("FTG") Announces Third Quarter 2013 Financial Results

TORONTO, ONTARIO--(Marketwired - Oct. 8, 2013) - Firan Technology Group Corporation (TSX:FTG) today announced financial results for the third quarter 2013.

  • Grew Aerospace sales by more than 13% in Q3 2013, compared to Q3 2012.
  • Expensed $0.4M in Q3 in starting up new Aerospace facilities in Tianjin, China and Chatsworth, California and generated revenues approaching $0.5M from both sites in the quarter
  • Generated $1.7M positive cash flow from operations (net of capital expenditures) in the quarter due primarily to the collection of large milestone payments in the Aerospace business.
  • Established joint venture with Tianjin Printronics Circuits Ltd ("TPC") to provide circuit boards to Aerospace customers from low cost country.

"FTG's third quarter had some very positive developments, such as the creation of our Joint Venture with TPC in China for our Circuit's business and the continued strong ramp in revenue from our two new Aerospace facilities, but we had some challenges in our Circuits Toronto facility where we had lower than expected sales and some yield issues", stated Brad Bourne, President and Chief Executive Officer. He added, "We are confident that we can address the challenges in our Toronto facility in our fourth quarter while maintaining our growth momentum across our Aerospace business."

Third Quarter Results: (three months ended August 30, 2013 compared with three months ended August 31, 2012)

Q3 2013 Q3 2012
Sales $ 13,319,000 $ 14,057,000
Operating Earnings (1): 315,000 1,109,000
- Net R&D Investment 431,000 714,000
- Aerospace Tianjin and Chatsworth Start-up Losses 428,000 234,000
- Income Tax 7,000 6,000
Net (Loss) / Earnings $ (551,000 ) $ 155,000
(Loss) / Earnings per share
- basic & diluted $ (0.03 ) $ 0.01

Year-To-Date Results: (nine months ended August 30, 2013 compared with nine months ended August 31, 2012)

Year-To-Date 2013 Year-To- Date 2012
Sales $ 40,572,000 $ 41,927,000
Operating Earnings(1): 1,843,000 3,417,000
- Net R&D Investment 1,734,000 1,944,000
- Aerospace Tianjin and Chatsworth Start-up Losses 1,268,000 641,000
- Income Tax 36,000 8,000
Net (Loss) / Earnings $ (1,195,000 ) $ 824,000
(Loss) / Earnings per share
- basic $ (0.03 ) $ 0.05
- diluted $ (0.03 ) $ 0.04
(1) Operating Earnings is not a measure recognized under the International Financial Reporting Standards ("IFRS").Management believes that this measure is important to many of the Corporation's shareholders, creditors and other stakeholders.The Corporation's method of calculating Operating Earnings may differ from other corporations and accordingly may not be comparable to measures used by other corporations.

Business Highlights

FTG accomplished many goals in the third quarter of 2013 that continue to improve the Corporation and position it for the future, including:

  • Achieved 13% growth in Aerospace business compared to same period last year
  • Generated $1.7M positive cash flow (operating cash flow, net of capital expenditures)
  • Won orders from two (2) new customers for Aerospace Tianjin facility
  • Won orders from eight (8) new customers for Aerospace Chatsworth facility
  • Invested $0.2M in the quarter and $1.3M year-to-date in capital equipment to improve capabilities across the company
  • Added new test equipment and production equipment in all three Aerospace facilities
  • Kicked-off activity for FTG Printronics Circuit Corp, the joint venture established with TPC in Tianjin, China to provide circuit boards from a low cost country

For FTG overall sales decreased by $0.7M (5%), from $14.1M in Q3 2012 to $13.3M in Q3 2013. For the first nine months, sales were $40.6M, a decrease of $1.4M or 3% versus the same period last year.

The Circuits Segment sales were down $1.3M or 13% in Q3 2013 versus Q3 2012. Year-to-date Circuits Segment sales were down $3.8M or 12%.

For the Aerospace segment, sales in Q3 2013 were up $0.6M or 12% compared to Q3 2012. For the year-to-date Aerospace segment sales were up $2.5M or 18%.

Net loss at FTG in Q3 2013 was $0.6M compared to net earnings of $0.2M in Q3 2012. Gross margins were depressed in the quarter due to start-up losses at the new aerospace facilities and the weak revenues in the Circuits Toronto facility. Administrative costs were up slightly due to costs associated with the Joint Venture.

The Circuits segment net loss before corporate and interest costs was $0.1M in Q3 2013 compared to net earnings $0.6M in Q3 2012. On a year-to-date basis, the Circuits business net earnings before corporate and interest costs was $0.1M compared to $2.2M for the same period last year. In both cases the decrease is primarily due to weak sales and yield issues in the Circuits Toronto facility.

The Aerospace net earnings before corporate and interest costs was $0.2M in Q3 2013 versus $0.1M in Q3, 2012. The net earnings this year are reduced by the $1.2M start-up losses for the two new facilities. On a year-to-date basis the net earnings before corporate and interests costs was $0.7M compared to $0.4M for the same period last year. Start-up losses for the 9 month period year-to-date were $1.3M.

As at August 30, 2013, the Corporation's primary source of liquidity included cash of $3.7M, accounts receivable of $9.5M and inventory of $8.3M. Receivables decreased in the quarter due to large milestone payments on two programs in the Aerospace segment. Net working capital at August 30, 2013 was $11.1M.

The Corporation will host a live conference call on Thursday, October 10, 2013 at 8:30 am (EDT) to discuss the results of Q3 2013.

Anyone wishing to participate in the call should dial 416-340-2216 or 1-866-226-1792 and identify that you are calling to participate in the FTG conference call. The Chairperson is Mr. Brad Bourne. A replay of the call will be available until October 24, 2013 and will be available on the FTG website at www.ftgcorp.com. The number to call for a rebroadcast is 905-694-9451 or 1-800-408-3053, pass code 4925971.

ABOUT FIRAN TECHNOLOGY GROUP CORPORATION

FTG is an aerospace and defense electronics product and subsystem supplier to customers around the globe. FTG has two operating units:

FTG Circuits is a manufacturer of high technology, high reliability printed circuit boards. Our customers are leaders in the aviation, defense, and high technology industries. FTG Circuits has operations in Toronto, Ontario, Chatsworth, California and a joint venture in Tianjin, China.
FTG Aerospace manufactures illuminated cockpit panels, keyboards and sub-assemblies for original equipment manufacturers of aerospace and defense equipment. FTG Aerospace has operations in Toronto, Ontario, Chatsworth, California and Tianjin, China.

The Corporation's shares are traded on the Toronto Stock Exchange under the symbol FTG.

FORWARD-LOOKING STATEMENTS

This news release contains certain forward-looking statements. These forward-looking statements are related to, but not limited to, FTG's operations, anticipated financial performance, business prospects and strategies. Forward-looking information typically contains words such as "anticipate", "believe", "expect", "plan" or similar words suggesting future outcomes. Such statements are based on the current expectations of management of the Corporation and inherently involve numerous risks and uncertainties, known and unknown, including economic factors and the Corporation's industry, generally. The preceding list is not exhaustive of all possible factors. Such forward-looking statements are not guarantees of future performance and actual events and results could differ materially from those expressed or implied by forward-looking statements made by the Corporation. The reader is cautioned to consider these and other factors carefully when making decisions with respect to the Corporation and not place undue reliance on forward-looking statements. Other than as may be required by law, FTG disclaims any intention or obligation to update or revise any such forward-looking statements, whether as a result of new information, future events or otherwise.

Additional information can be found at the Corporation's website www.ftgcorp.com.

FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Balance Sheets
(in thousands of Canadian dollars) August 30, November 30,
2013 2012
As at (unaudited) (audited)
ASSETS
Current assets
Cash $ 3,721 $ 1,446
Accounts receivable 9,511 10,276
Taxes receivable 194 250
Inventories 8,334 7,927
Prepaid expenses 349 432
22,109 20,331
Non-current assets
Plant and equipment, net 5,655 5,608
Goodwill 1,039 1,039
Deferred income taxes 1,375 1,375
Intangible assets 208 244
Total assets $ 30,386 $ 28,597
LIABILITIES AND EQUITY
Current liabilities
Bank indebtedness $ 2,633 $ 994
Accounts payable and accrued liabilities 6,970 7,184
Provisions 347 309
Customer deposits, net of deferred development 760 843
Current portion of long-term bank debt 304 44
11,014 9,374
Non-current liabilities
Long-term bank debt 1,813 361
Subordinated loan 3,833 3,613
Government assistance 898 1,234
Total liabilities 17,558 14,582
Equity
Deficit $ (10,299 ) $ (9,104 )
Accumulated other comprehensive loss (170 ) (85 )
(10,469 ) (9,189 )
Share capital
Common shares 12,681 12,681
Preferred shares 2,218 2,218
Contributed surplus 8,336 8,305
Total equity attributable to Firan Technology Group Corporation shareholders 12,766 14,015
Non-controlling interests 62 -
Total equity 12,828 14,015
Total liabilities and equity $ 30,386 $ 28,597
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of (Loss) Earnings
Three months ended Nine months ended
(unaudited)
(in thousands of Canadian dollars, except per share amounts)
August 30,
2013
August 31,
2012
August 30,
2013
August 31,
2012
Sales $ 13,319 $ 14,057 $ 40,572 $ 41,927
Cost of sales
Cost of sales 10,702 10,516 31,793 30,912
Depreciation of plant and equipment 437 419 1,278 1,245
Total cost of sales 11,139 10,935 33,071 32,157
Gross margin 2,180 3,122 7,501 9,770
Expenses
Selling, general and administrative 2,147 2,016 6,551 6,436
Research and development costs 501 778 1,944 2,168
Recovery of research and development costs (70 ) (64 ) (210 ) (224 )
Depreciation/amortization of plant and equipment and intangible assets 39 35 115 99
Interest expense on short-term debt 24 11 57 56
Interest expense on long-term debt 80 69 240 204
Foreign exchange loss (gain) 29 116 (11 ) 199
Total expenses 2,750 2,961 8,686 8,938
(Loss) earnings before income taxes (570 ) 161 (1,185 ) 832
Income tax expense 7 6 36 8
Net (loss) earnings $ (577 ) $ 155 $ (1,221 ) $ 824
Attributable to:
Non-controlling interests (26 ) - (26 ) -
Equity holders of Firan Technology Group Corporation (551 ) 155 (1,195 ) 824
(Loss) earnings per share, attributable to the equity holders of Firan Technology Group Corporation
Basic $ (0.03 ) $ 0.01 $ (0.07 ) $ 0.05
Diluted $ (0.03 ) $ 0.01 $ (0.07 ) $ 0.04
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Comprehensive (loss) income
Three months ended Nine months ended
(unaudited)
(in thousands of Canadian dollars)
August 30,
2013
August 31,
2012
August 30,
2013
August 31,
2012
Net (loss) earnings $ (577 ) $ 155 $ (1,221 ) $ 824
Other comprehensive income (loss)
Foreign currency translation adjustments 66 (213 ) 249 (136 )
Net unrealized loss on derivative financial instruments designated as cash flow hedges (334 ) - (334 ) -
(268 ) (213 ) (85 ) (136 )
Total comprehensive (loss) income $ (845 ) $ (58 ) $ (1,306 ) $ 688
Attributable to:
Equity holders of Firan Technology Group Corporation $ (819 ) $ (58 ) $ (1,280 ) $ 688
Non-controlling interests $ (26 ) $ - $ (26 ) $ -
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Changes in Equity
Attributed to the equity holders of Firan Technology Group Corporation
Nine months ended August 30, 2013
Accumulated
(unaudited) Other Non-
(in thousands of Canadian dollars) Common
Shares
Preferred
Shares
Deficit Contributed
Surplus
Comprehensive
(Loss)
Total controlling
interests
Total
equity
Balance, November 30, 2012 $ 12,681 $ 2,218 $ (9,104 ) $ 8,305 $ (85 ) $ 14,015 $ - $ 14,015
Net loss - - (1,195 ) - - (1,195 ) (26 ) (1,221 )
Stock-based compensation - - - 31 - 31 - $ 31
Foreign currency translation adjustments - - - - 249 249 - $ 249
Net unrealized loss on derivative financial instruments designated as cash flow hedges - - - - (334 ) (334 ) - (334 )
Contribution from non-controlling interests - - - - - - 88 $ 88
Balance, August 30, 2013 $ 12,681 $ 2,218 $ (10,299 ) $ 8,336 $ (170 ) $ 12,766 $ 62 $ 12,828
Attributed to the equity holders of Firan Technology Group Corporation
Nine months ended August 31, 2012 Accumulated
Other Non-
(unaudited) Common Preferred Contributed Comprehensive controlling Total
(in thousands of dollars) Shares Shares Deficit Surplus Income (Loss) Total interests equity
Balance, November 30, 2011 $ 12,681 $ 2,218 $ (10,032 ) $ 8,249 $ 12 $ 13,128 $ - $ 13,128
Net earnings - - 824 - - 824 - $ 824
Stock-based compensation - - - 40 - 40 - $ 40
Foreign currency translation adjustments - - - - (136 ) (136 ) - (136 )
Balance, August 31, 2012 $ 12,681 $ 2,218 $ (9,208 ) $ 8,289 $ (124 ) $ 13,856 $ - $ 13,856
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Cash Flows
Three months ended Nine months ended
(unaudited)
(in thousands of Canadian dollars)
August 30,
2013
August 31,
2012
August 30,
2013
August 31,
2012
Net inflow (outflow) of cash related to the following:
Operating activities
Net (loss) earnings $ (577 ) $ 155 $ (1,221 ) $ 824
Items not affecting cash:
Stock-based compensation 11 15 31 40
Gain on disposal of plant and equipment - - (25 ) (2 )
Effect of exchange rates on U.S. dollar Canadian debt 81 - 189 (17 )
Depreciation of plant and equipment 464 442 1,357 1,308
Amortization of intangible assets 12 12 36 36
Amortization of deferred financing costs 7 7 21 43
AMIS interest accretion 73 69 219 183
Amortization of government assistance (112 ) (111 ) (336 ) (291 )
Changes in non-cash operating working capital 1,930 (455 ) 218 (2,139 )
1,889 134 489 (15 )
Investing activities
Additions to plant and equipment (196 ) (487 ) (1,277 ) (1,966 )
Proceeds from disposal of plant and equipment - - 25 3
Additions to deferred financing costs - - - (108 )
(196 ) (487 ) (1,252 ) (2,071 )
Net cash flow from operating and investing activities 1,693 (353 ) (763 ) (2,086 )
Financing activities
Increase in bank indebtedness 790 842 1,451 842
Proceeds from subordinated loan and government assistance - - - 1,490
Proceeds from long-term bank debt 519 - 1,746 -
Repayments of long-term bank debt (63 ) - (125 ) (1,423 )
Funding from non-controlling interests 26 26
1,272 842 3,098 909
Effects of foreign exchange rate changes on cash flow 199 (87 ) (60 ) (47 )
Net cash flow 3,164 402 2,275 (1,224 )
Cash, beginning of period 557 318 1,446 1,944
Cash, end of period $ 3,721 $ 720 3,721 $ 720
Disclosure of cash payments
Payment for interest $ 31 $ 12 $ 78 $ 78
Payments for income taxes $ - $ 6 $ 22 $ 8

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